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In this paper, the control strategy for the static synchronous compensator (STATCOM) used in utility distribution systems is investigated, and a novel fuzzy-PI-based direct-output-voltage (DOV) control strategy is presented. Based on power balancing principle and feedforward decoupling control, this novel DOV control strategy cannot only reduce the active and reactive current control loops of a conventional double-loop control strategy but also achieve the decoupling control to regulate dc-link voltage and maintain the voltages at the point of common coupling (PCC). In order to effectively improve the immunity capability of this novel DOV control strategy to the uncertainties in system parameters, two fuzzy PI controllers are separately employed to maintain the voltages at the PCC and to simultaneously regulate dc-link voltage. The validity and effectiveness of this novel control strategy for the STATCOM used in utility distribution systems have been verified by simulation results, and a scaled physical prototype rated at plusmn300 kVAr is also developed to test the STATCOM system.